Tax on Dependent Care & Paid Family Leave for NY/NJ

[dhfeigenbaum]

I live in NJ and work in NY and have two questions regarding dependent care deductions and paid family leave.

1. I elect to have $5,000 of dependent care benefits deducted annually that is not taxed on the Federal level. I am filing my NJ state tax return, and I am led to believe that this $5,000 does get taxed on the state level and needs to be added to my Box 1 wages. Is this correct, or am I mistaken?

2. I took some time off at the beginning of 2019 and was compensated under the NY State Paid Family Leave Act. I received a total compensation of $1,175 for this and included it in my taxable income on the Federal level. It is my understanding that this compensation would not be taxed at the state level in NJ. I am trying to file my NJ return, but this compensation for paid family leave is auto-populating from my Federal return under "other non-wage income." Again, am I mistaken, am I missing something, or is this correct?

[MaryK4]

1. Yes, New Jersey does tax fringe benefits that are not taxed for federal or most other states.  Because you worked in New York, you should see the additional amount in Box 15-17 for the NJ state tax info.  

2. For the NY PFL, after you enter the W2, you should see "Do any of these uncommon situations apply to this W2?" and you can indicate Paid Family Leave here- this should correct the entry.

[dhfeigenbaum]

Thank you for the response.

Regarding the NY PFL, I do already have the Paid Family Leave box checked in my Federal return. It is calculating correctly for my Federal return. On the State level, when I enter my income information for my NJ return, there are two separate screens. The first screen is "Your Business Summary" and under description, it shows "Paid Family Leave" with a Taxable Amount shown as 0.

The second screen is for "Other Non-Wage Income." This is where it automatically pulls the NY PFL income information from what I entered in my Federal return. It shows the name of the benefits company that made the payment under Description and the total amount I received of $1,175. I cannot change anything on this line item. It's as if TurboTax is recognizing the payment as other legitimate non-wage income and not the income from the NY PFL. As it is entered right now, I believe NJ is taxing me on this amount. Is this the case? If it is, should NJ be taxing me on this amount? This is where I am getting confused.

[ar1018]

Having same issue. On my return, I received NY PFL on a 1099-MISC but live in NJ so I don’t have the W2 checkbox option. The NJ  return cannot be edited to delete this income. 

[xecckh0]

I am in the same boat as this users.  Is there a resolution for this issue?

[BillM223]

Here is a workaround developed by another user in the Community. It will increase your tax slightly but still let you e-file - reporting things exactly prevents e-filing.

So try this:

1. In NJ "Other Non-Wage Income", keep the 1099-MISC NY PFL amount as is.

2. At the same time, in "Summary of Taxes Paid to Other States" do claim credit for NY PFL by leaving the total NY Amount as is. No action needed here as the total NY amount automatically carries over from your NY non-resident form.

In other words, you are letting NJ tax you for NY PFL but you are also claiming credit for it, which pretty much evens things out.

The other way to do it would have you adding a negative number as an adjustment to cancel out the PFL in NJ; however, other users have reported that this negative number on the NJ return prevents e-filing.

Take a look at this discussion (make sure to go all the way to the end).

[BillM223]

@dhfeigenbaum

I haven't looked but if it is done like other deductible items on the federal return but not in NJ, I would expect that the $5,000 would be added back automatically to NJ state income on your return. Take a look for it on your return.